The Cypriot regulator CySEC has started today, through issuing a relevant announcement addressed to all the interested parties in its jurisdiction, the procedure to fulfill its obligations and align itself fully to the provisions of the new European Union regulation on Market Abuse.
This move by CySEC has been necessitated by the adoption of a new framework applicable to market abuse prohibition and prevention by the European institutions, which consists of Regulation 596/2014 on market abuse (the “MAR”) and of Directive 2014/57/EU on criminal sanctions for market abuse both of which were published in the Official Journal of the European Union on 12 June 2014. These two instruments replace and repeal Directive 2003/6/CE on insider dealing and market manipulation.
According to some observers, the decision to adopt a regulation instead of a directive stems from the need to harmonise core concepts and rules on market abuse in order to ensure the most effective and efficient enforcement of the rules. Revisions of EU rules in this regard were viewed as necessary in order to keep pace with market innovations and fill in the regulatory gaps developed over the course of more than ten years under the former regime. In a nutshell, the new regime, which shall enter into application in July 2016, entails an expanded coverage of the various financial instruments, includes further guidance on the definition of inside information, introduces new market manipulation offences, provides for a reduced disclosure burden for SMEs and includes harmonised criminal sanctions.
Aiming to ensure market integrity and investor protection, the European Commission points out that “The Market Abuse Regulation ensures regulation keeps pace with market developments such as the growth of new trading platforms, over the counter (OTC) trading and new technology such as high frequency trading (HFT), strengthens the fight against market abuse across commodity and related derivative markets, explicitly bans the manipulation of benchmarks (such as LIBOR), reinforces the investigative and administrative sanctioning powers of regulators and ensures a single rulebook while reducing, where possible, the administrative burdens on SME issuers. The Directive on criminal sanctions for market abuse (Market Abuse Directive) complements the Market Abuse Regulation by requiring all Member States to provide for harmonised criminal offences of insider dealing and market manipulation, and to impose maximum criminal penalties of not less than 4 and 2 years imprisonment for the most serious market abuse offences. Member States will have to make sure that such behaviour, including the manipulation of benchmarks, is a criminal offence, punishable with effective sanctions everywhere in Europe.”
The MAR will be immediately applicable as of 3 July 2016, except for the provisions related to OTFs, SME growth markets and emissions allowances which shall become applicable on 1 January 2017. In addition, Member States should implement the Sanctions Directive and take the necessary measures to grant national competent authorities the powers deriving from the MAR by 3 July 2016.
As the national competent authority in Cyprus, according to its relevant announcement CySEC is tasked with undertaking all the necessary work and the drafting for the transposition of the MAR, and this is why it is preparing to take several actions including the implementation of maximum harmonization provisions set out in the MAR, as well as setting forth the upcoming binding technical standards and implementing acts of the European Commission. The regulator will also amend or repeal all national laws that cover matters now falling under MAR/MAD.
CySEC has therefore issued its announcement in order to alert all the affected and interested parties in its jurisdiction and avail itself of the opportunity to advise them to consult carefully with regard to this new regulation in order to be aware of the upcoming changes and to plan ahead.